Should Payscale’s Earnings Data Be Trusted?

Despite the large amount of money spent on higher education, prospective students, their families, and the public have historically known very little about the earnings of students who attend college. This has started to change in recent years, as a few states (such as Virginia) began to publish earnings data for their graduates who stayed in state and the federal government publishes earnings data for certain programs through gainful employment rules. But this leaves out many public and private nonprofit institutions, and complete data are not available without a student unit record system.

As is often the case, the private sector steps in to try to fill the gap. Payscale.com has collected self-reported earnings data by college and major among a large number of bachelor’s degree recipients (those with a higher degree are excluded—the full methodology is here). Their 2014 “return on investment” report ranked colleges based on the best and worst dollar returns, with Harvey Mudd College at the top with a $1.1 million return over 20 years and Shaw University at the bottom with a return of negative $121,000.

Payscale data is self-reported earnings among individuals who happened to look at Payscale’s website and were willing to provide estimates of their annual earnings. It’s my strong suspicion that self-reported earnings from these individuals are substantially higher than the average bachelor’s degree recipient, and these are often based on a relatively small number of students. For example, the estimates of my alma mater, Truman State University, are based on 251 graduates for a college that graduates about 1,000 students per year. As many Truman students go on to get advanced degrees, probably about 500 students per year would qualify for the Payscale sample. Yet 102 students provided data within five years of graduation—about four percent of graduates who did not pursue further degrees.

But is it still worth considering? Yes and no. I don’t put a lot of stock in the absolute earnings listed, since they’re likely biased upward and there are relatively few cases. Additionally, there is no adjustment for cost of living—which really helps colleges in expensive urban areas. But the relative positions of institutions with similar focuses in similar parts of the country are probably somewhat close to what complete data would say. If the self-reporting bias is similar, then controlling for cost of living and the composition of graduates could yield useful information.

I hope that Payscale can do a version of their ROI estimates taking cost of living into account, and try to explore whether their data are somewhat representative of a particular college’s bachelor’s degree recipients. Although I commend them for providing a useful service, I still recommend taking the dollar value of ROI estimates with a shaker of salt.

More Net Price Madness!

As March Madness gets ready to tip off, I received an additional Net Price Madness entry from Justin Chase Brown, associate director of student financial aid at the University of Missouri-Columbia. (His bracket is shared with permission, and I appreciate his willingness to share!) He included three different specifications, considering the percentage change in net price between the 2010-11 and 2011-12 academic years:

(1) Largest percentage change in net price, not allowing teams seeded 13th or lower to advance.

(2) Smallest percentage change in net price, not allowing teams seeded 13th or lower to advance.

(3) Smallest percentage change in net price, regardless of seed.

His brackets can be found in this spreadsheet, and a picture of the third bracket is below:

netprice_bracket_brown

Justin’s bracket has Florida “winning” the prize for the largest percentage change in net price (18%) over George Washington, Oregon, and Arizona State. Harvard wins for the smallest percentage change in net price (-21%)—although it should be noted that not a lot of students actually qualify in the net price cohort and their endowment is large enough to provide free college for all admitted students. Stanford, BYU, Mercer, and Kansas State also make the Final Four in at least one of the brackets.

More ways to pick your bracket based on higher education data can be found in Jonah Newman’s summary in The Chronicle of Higher Education, which also links to my original Net Price Madness piece.

The 2014 Net Price Madness Tournament

It’s time for my second annual Net Price Madness Tournament, in which colleges which have men’s basketball teams in the NCAA Division I tournament are ranked based on net price in a tournament format. In last year’s Net Price Madness, North Carolina State, North Carolina A&T, Northwestern State (LA), and Wichita State were the regional winners for the lowest net price among students who received any financial aid in the 2011-12 academic year. And the Shockers did go on to advance to the Final Four, so maybe this method has a tiny correlation to basketball success!

Here are the results for the 2014 Net Price Madness Tournament in a convenient spreadsheet that also includes winners for each game, net price by income level, percent Pell, and six-year graduation rates. The regional winners for 2014 are:

East: North Carolina Central University (14): $8,757 net price, 64% Pell, 43% grad rate

Midwest: Wichita State University (1): $8,645 net price, 36% Pell, 41% grad rate

South: University of New Mexico (7): $11,001 net price, 39% Pell, 46% grad rate

West: University of Louisiana-Lafayette (14): $5,891 net price, 35% Pell, 44% grad rate

And here is the full bracket:

netprice_bracket

Congratulations to these institutions, and a big raspberry to the nine colleges that charged a net price of over $20,000 to the typical student with household income below $30,000 per year. Feel free to use these data to inform your rooting interests!

UPDATE 3/17 Noon ET: Mark Huelsman of Demos drew my attention to the oddity that Wichita State’s net price for all students ($8,645) is far lower than the net price for each of the three lowest income brackets (roughly $12,500 to $13,500). I investigated the IPEDS data report from WSU and discovered that 706 of the 721 WSU first-year, full-time, in-state students receiving Title IV financial aid (listed as Group 4) were reported as having incomes below $30,000 in 2011-12; similar percentages existed for the previous two years.

The sample for the full net price number is somewhat different–it’s first-year, full-time, in-state students receiving any grant aid (including the institution, listed as Group 3). This sample has 902 students, 179 more than the previous sample. Comparing net tuition revenue from the two groups, Group 4 had roughly $9.5 million in net revenue in 2011-12 and the larger Group 3 had $7.8 million in net revenue. This is unusual, to say the least, and it is possible that one of the net price numbers listed in IPEDS is incorrect. I’m continuing to investigate this point.

Do States and Colleges Affect Student Fees?

I am presenting a paper, “A Longitudinal Analysis of Student Fees: The Roles of States and Institutions,” at the Association for Education Finance and Policy’s annual conference today.  Here is the abstract:

Student fees are used to finance a growing number of services and programs at colleges and universities, including core academic functions, and make up 20% of the total cost of tuition and fees at the typical four-year public college. Yet little research has been conducted to examine state-level and institutional-level factors that may affect student fee charges. In this paper, I use state-level data on tuition and fee policy, the role of state governments and higher education systems, and partisan political balance combined with institutional-level data on athletics programs and selectivity to create a panel from the 1999-2000 to 2011-12 academic years. I find that some state-level factors that would be expected to reduce student fees, such as fee caps, do reduce fees at four-year public colleges, but giving the legislature authority to set fees results in higher fees. Additional state grant aid and higher-level athletics programs are also associated with higher fees in my primary model.

And here are the slides from my presentation, summarizing the study (which is still a work in progress). Any comments are greatly appreciated!

Should Campus-Based Financial Aid Be Reallocated?

I am presenting a paper, “Exploring Trends and Alternative Allocation Strategies for Campus-Based Financial Aid Programs,” at the Association for Education Finance and Policy’s annual conference this afternoon.  Here is the abstract:

Two federal campus-based financial aid programs, the Supplemental Educational Opportunity Grant (SEOG) and the Federal Work-Study program (FWS), combine to provide nearly $2 billion in funding to students with financial need. However, the allocation formulas have changed little since 1965, resulting in community colleges and newer institutions getting much smaller awards than longstanding private colleges with high costs of attendance. I document the trends in campus-level allocations over the past two decades and explore several different methods to reallocate funds based on current financial need while limiting the influence of high-tuition colleges. I show that allocation formulas that count a modest amount of tuition toward financial need reallocate aid away from private nonprofit colleges and toward public colleges and universities.

And here are the slides from my presentation, summarizing the study (which is still a work in progress). Any comments are greatly appreciated!

Come See Me at AEFP!

I’m presenting two papers at the annual conference of the Association for Education Finance and Policy (AEFP) this week in San Antonio. Below are short descriptions of the papers that I’ll be presenting, along with information about the time and room location.

Are Federal Allocations for Campus-Based Financial Aid Programs Equitable and Effective?(Thursday at 2:45 PM, Conference Room 4, Third Floor)

Abstract: Two federal campus-based financial aid programs, the Supplemental Educational Opportunity Grant (SEOG) and the Federal Work-Study program (FWS), combine to provide nearly $2 billion in funding to students with financial need. However, the allocation formulas have changed little since 1965, resulting in community colleges and newer institutions getting much smaller awards than longstanding private colleges with high costs of attendance. I document the trends in campus-level allocations over the past two decades and explore several different methods to reallocate funds based on current financial need while limiting the influence of high-tuition colleges. I show that allocation formulas that count a modest amount of tuition toward financial need reallocate aid away from private nonprofit colleges and toward public colleges and universities.

A Longitudinal Analysis of Student Fees: The Roles of States and Institutions(Saturday at 9:45 AM, Conference Room 12, Third Floor)

Abstract: Student fees are used to finance a growing number of services and programs at colleges and universities, including core academic functions, and make up 20% of the total cost of tuition and fees at the typical four-year public college. Yet little research has been conducted to examine state-level and institutional-level factors that may affect student fee charges. In this paper, I use state-level data on tuition and fee policy, the role of state governments and higher education systems, and partisan political balance combined with institutional-level data on athletics programs and selectivity to create a panel from the 1999-2000 to 2011-12 academic years. I find that some state-level factors that would be expected to reduce student fees, such as fee caps, do reduce fees at four-year public colleges, but giving the legislature authority to set fees results in higher fees. Additional state grant aid and higher-level athletics programs are also associated with higher fees in my primary model.

I welcome any feedback you may have on either of these papers, as they are both preliminary works that still need polishing at the very least. I hope to see you at AEFP!

Can Parents Be Forced to Pay for College?

The recent case of 18-year-old Rachel Canning, a New Jersey teenager who moved out of her parents’ house and sued to force them to pay for private high school and future college tuition, has gained national attention. Although a Morris County judge denied Ms. Canning’s emergency request for $600 per week in emergency support, the case will continue to wind its way through New Jersey’s legal system. The final decision will determine whether she is an emancipated minor, as her parents claim, or whether she is dependent on her parents, as she claims.

The issue of whether parents should contribute toward their child’s college education is nothing new, although the FAFSA does assume that parents will contribute. Under current FAFSA rules, students are automatically considered to be dependent on their parents for financial aid purposes until they reach at least the age of 23 unless they marry, have children, join the military or meet at least one criterion regarding self-support. Some students would like to be declared as being independent in order to get additional financial aid, particularly if their parents are wealthy but do not want to contribute toward the expected family contribution (EFC). But if this were allowed, federal financial aid costs would skyrocket as families choose the dependency status that works best for them.

The result of this case would impact her federal financial aid eligibility. The relevant criterion in the Canning case is whether she has been classified as an emancipated minor by a New Jersey court, which would be the case if her parents win. In that case, and if her parents do not have to give her money to pay for college, Ms. Canning would be classified as an independent student with an EFC of close to zero—resulting in the maximum Pell Grant. But if Ms. Canning wins, then she would have to consider her parents’ income and assets on the FAFSA and she would likely get little to no federal financial aid; however, she would get some money from her parents through winning the case.

So will Canning v. Canning affect the structure of federal financial aid going forward? Probably not. But it still bears watching as the lawsuit could help to set precedent over the issues of emancipated minors and paying for college. I’ll keep an eye on the case—if for no other reason than it’s dominating the local news in New Jersey!

College Accountability and the Obama Budget Proposal

The Fiscal Year 2015 $3.9 trillion budget document from the Obama Administration includes a request of $68.6 billion in discretionary funds for the Department of Education, up $1.3 billion from 2014 funding. This excludes a great deal of mandatory spending on entitlements, including student loan costs/subsidies, some Pell Grant funding, and some other types of financial aid. (Mandatory spending is much harder to eliminate than discretionary funding, as illustrated by this helpful CBO summary.) The budget is also a reflection of the Administration’s priorities, even if many components are unlikely to be approved by Congress. For a nice summary of the Department of Education’s request, see this policy brief from the New America Foundation.

On the higher education front, the Obama budget implies that accountability will be a key priority of the Department of Education. The Administration made two key requests in this area: $10 million to fund continued development of the Postsecondary Institution Ratings System (PIRS) and $647 million for a fund to reward colleges that enroll and graduate Pell recipients. There was a holdover request for $4 billion in mandatory funds for a version of Race to the Top in higher education, but few in the higher education policy community are taking this plan seriously.

The $10 million for PIRS would go toward “further development and refinement of a new college rating system” (see p. T-156). This request is a signal that the Administration is taking the development of PIRS seriously, but the $10 million in funds suggests that large-scale additional data collection is unlikely to happen in the near future. It is also unlikely that the federal government will work to audit IPEDS data for the rating, something that I called for in my recent policy brief on ratings. Even if the specific $10 million request for PIRS is not acted upon, the Department of Education will use other discretionary funds to move forward.

The $647 million request for College Opportunity and Graduation Bonuses, if approved, would provide bonuses to colleges that are successful in enrolling and graduating large numbers of Pell recipients. I view this as a first attempt to tie federal funds to college performance using metrics that are likely to be in PIRS. I would be surprised if any Pell Grant funds get reallocated through college ratings except for perhaps a handful of very low-performing colleges, but it is possible to get some additional bonus funds tied to ratings.

I had a poll on a blog post a couple weeks ago asking for readers’ thoughts of the likelihood that PIRS would be tied to student financial aid dollars by 2018. The majority of the respondents gave this less than a 50% chance of happening, and I am inclined to agree as well. The Administration’s budget priorities suggest a serious push toward tying some funds to performance, although it is worth emphasizing that a future Congress and President must agree.

What are your thoughts of the Obama Administration’s higher education budget, particularly about accountability? If you have any comments to share, please do so and continue the conversation!

New Policy Brief on College Ratings

I am pleased to announce the release of my newest policy brief, “Moving Forward with Federal College Ratings: Goals, Metrics, and Recommendations” through my friends at the Wisconsin Center for the Advancement of Postsecondary Education (WISCAPE). In the brief, I outline the likely goals of the Obama Administration’s proposed Postsecondary Institution Ratings System (PIRS), discuss some potential outcome measures, and provide recommendations for a fair and effective ratings system given available data. I welcome your comments on the brief!